Thursday, October 16, 2008, 2:35 PM

Independence Day May Not Last

One of the most complex classification issues in the modern workplace is the question of what constitutes an "independent contractor." The most recent example of this in the FLSA context is the October 13 Fifth Circuit decision in Hopkins v. Cornerstone America (No. 07-10952). One might have thought the result would be predictable; after all, one of the plaintiffs had previously defended himself in a sexual harassment suit by contending he was an independent contractor. Nonetheless, he joined in the filing of a collective action against his employer in 2005, asserting that "sales leaders" for Cornerstone were employees entitled to overtime. The district court found that all of the other plaintiffs were employees, but dismissed the claims of the individual who had taken inconsistent positions.

Cornerstone appealed the classification ruling, while the odd man out took issue with his having been dropped from the case. Cornerstone lost both arguments. As to classification, the Court of Appeals found pervasive control of the contractors' territories, products and prices, also dictating terms of the hiring and firing of sales personnel who supported the sales effort. Such factors, said the court, rendered the sales leaders "dependent on cornerstone to such an extent that they could not plausibly be considered" to be independent businesspeople.

The dismissed plaintiff was let back into the case because the "semantic inconsistency" of his positions didn't control; one may be an independent contractor for some purposes and yet be a statutory employee under the FLSA, the Fifth Circuit held.

Independent contractor determinations arise under federal and state laws, and each of them entails a different analysis. On a related topic, on the same day as the Hopkins decision a bill was introduced in the Senate to counter independent contractor categorization in order to avoid paying employee benefits. Watch this space for "progress" on this and related issues.